Towards a service business model

19 April 2017

Monica Westman Svenselius

How can product companies build competitive advantage through services and product-service combinations? A newly published book by two internationally respected researchers, one of them from LiU, may guide you to the answer.

Christian Kowalkowski, bitr professor, LiU 2017The book is intended for business developers, consultants and decision-makers in industry, and is based on more than a decade’s research and long-standing collaboration with companies.

The service sector is growing and even companies based on traditional product sales have started to strategically compete through services and comprehensive solutions – selling transport instead of lorries and trucks, illumination instead of lamps, experience instead of coffee, and many other examples.

“Competition in these markets is becoming stiffer. Increasingly, having world-class products is no longer enough to achieve profitable growth. More than ever, to stand out against competitors and sustain growth, companies around the world are transitioning from product-centric to service- and solution-savvy business models. There are several advantages to selling services: such sales are generally significantly less sensitive to market fluctuations. And it’s possible to form strategic partnerships between the customer and the supplier when selling comprehensive solutions,” says Christian Kowalkowski, associate professor of industrial marketing at LiU.

12-step roadmap

Together with Wolfgang Ulaga, AT&T professor and co-executive director of the Center for Services Leadership at Arizona State University, he has written and published the book “Service Strategy in Action – A practical guide for growing your B2B service and solution business.” It contains a 12-step roadmap to a successful service strategy and implementation.

Service strategy in action“We have both studied businesses making the transition to a service-centric model for many years and have published many articles in scientific journals, but these are not read by people working in industry. This is why we decided to collect the results in a book of practical steps,” says Christian Kowalkowski.

The book consists of 12 independent but related chapters. This means that any company can take on board the parts it specifically needs.

“It depends how far the company has come in its service journey. It may be a case of looking at sales and marketing – how to transition the sales organisation from selling products to selling comprehensive solutions. Pricing strategy is another question, as are how to manage third-parties and how willing the company employees are to embrace change,” explains Christian Kowalkowski.

Critical questions

The end of each chapter presents a list of ten critical questions that require answers.

“These questions are all based on our research, and capture challenges that companies must deal with in order to make progress. Hard factors such as resources and abilities are often emphasised, but in our book we also shine the spotlight onto soft factors, such as culture, leadership and change processes.”

It is not just manufacturing industry that will benefit from the book. It also contains examples from consumer markets, such as a chain of pet stores that developed under its own trademark services in both trimming and training, such as daycare for dogs and holiday kennels.

“This strategy also has risks: the penalty for letting people down on a service is typically more severe that the penalty for letting people down on a product,” Christian Kowalkowski points out. “Drumming up a few new service ideas and crafting commercial brochures won’t do the trick! Instead, companies must transform their business and make change stick.”

The authors have published the book from their own publishing house, Service Strategy Press, and it is being sold through Amazon as paperback and ebook.

“Our intention in this book is to provide decision makers with the tools they need to craft a competitive service strategy and put it into practice. We also invite companies to share their service strategy story on our website where they will be able to exchange experiences. We hope that our book will fill the gap of long needed practical guidelines.”